BI and ERP integration

David C. Chou and Hima Bindu Tripuramallu

Department of Computer Information Systems, Eastern Michigan University,
Ypsilanti, Michigan, USA, and
Amy Y. Chou
College of Business Administration, University of Toledo, Toledo, Ohio, USA
Abstract
Purpose This paper seeks to propose a business intelligence (BI) and enterprise resource planning
(ERP) integrated framework that adds value to enterprise systems.
Design/methodology/approach A conceptual approach is taken.
Findings ERP systems integrate all facets of the business and make data available in real time.
BI tools are capable of accessing data directly from ERP modules.
Originality/value The value-added system proposed allows enterprise-wide transaction data to be
collected and analyzed for organizational decision-making processes.
Keywords Decision support systems, Data handling
Paper type Conceptual paper
1. Introduction
Over the past few years, integrated enterprise resource planning (ERP) applications
have brought a new way of delivering operation information. The advantages of these
changes have transformed many organizations, which improved nancial visibility,
streamlined supply chain processes, and minimized human resource (HR) processes
and overhead.
The beginning of ERP concept can be traced back to 1960s. During that time, the
manufacturing systems were mainly handling inventory control, based on traditional
inventory concept. The next decades (1970s) manufacturing systems shifted to
material requirement planning (MRP) transactions. MRP helped in translating the
master production schedule into requirements for raw material planning and
procurement. The concept of MRP-II (manufacturing resource planning) came in 1980s.
Manufacturing resource planning involved optimizing the production process and
distribution management (Yen et al., 2001). Later, MRP-II was extended to include
areas such as corporate nance, personnel management, engineering process, and
business project management. The development of manufacturing systems gave birth
to ERP that supported the cross-functional coordination and integration within the
production process. The modern ERP includes the entire range of a companys
activities. ERP system is a business management system that integrates all facets of
the business, including planning, marketing and manufacturing (Yen et al., 2001). More
than 20,000 rms in the world spent billions of US dollars to install the ERP systems.
Around 70 percent of the Fortune 1,000 companies had deployed ERP applications by
1997 for manufacturing, nance, HRs, and other main areas (Yen et al., 2001).
Information is the foundation of every critical business decision. The creation of
ERP systems integrates all functional areas of the organization. ERP systems are
backbone systems for most organizations that integrate back-ofce applications such
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/0968-5227.htm
IMCS
13,5
340
Information Management &
Computer Security
Vol. 13 No. 5, 2005
pp. 340-349
qEmerald Group Publishing Limited
0968-5227
DOI 10.1108/09685220510627241
as nance, purchasing, HR, inventory management, etc. Although ERP systems can
integrate all business transaction data into their master databases for organizational
planning, it is not a system for data analysis and decision support process.
Decision support function is vital to any company since it helps company plan
ahead and reduce the time on decision-making, and then improve efciencies. Decision
support capability can be a key to the success of an organization. Providing a
consolidated analysis of the data and user-friendly reporting capabilities will help
users make intelligent and correct decisions and gain advantages over their
competitors. If an organization does not take advantage of decision support systems, it
can not take complete advantage of the data and may lose its competitive edge.
Most ERP systems today have highly integrated databases. Report writers can
access data from multiple ERP modules and then integrate them into reports. Many
vendors also have business intelligence (BI) tools to access their data modules directly.
The most current information technology is to congregate all needed data from the
ERP system and then load them into a data warehouse or a data mart, and then link to
BI tools (such as OLAP, data mining, query and reporting) and report writers to create
a more consistent and knowledge-centric data reports. This BI and ERP integrated
framework adds value to enterprise systems. Enterprise-wide transaction data can be
collected and then analyzed for decision-making usage.
This paper identies the value of integrating ERP and BI systems and how they
work together to provide a better decision support capability. This paper rst
discusses the content and the challenges facing ERP systems and their needs for BI.
It then identies the power and the capabilities of BI. Comparisons of existing BI
products are conducted next. The next section provides an integrated architecture for
ERP and BI, and then its benets and concerns. The nal conclusion is provided in the
last section.
2. Enterprise resource planning systems
2.1 Implications of ERP systems
ERP is a software-driven business management system that integrates all facets of the
business, including planning, manufacturing, sales, and marketing. ERP systems can
be used to manage operational business information for corporate resource planning.
ERP can be applied to areas such as nance, HRs, manufacturing and logistics, supply
chain management, and data analysis. ERP can provide the following business
functions (Yen et al., 2001).
.
Finance. General ledger, accounts receivable, accounts payable, xed assets,
treasury management, cost control.
.
HR. HR administration, payroll, self-service HR.
.
Manufacturing and logistics. Production planning, order entering, warehouse
management, transportation management, project management, plant
maintenance, customer service management.
ERP systems usually have the following key components: client server system,
enterprise database, and application modules (Yen et al., 2001). According to Yen et al.
(2001), an ERP system is supported by client/server technology and its applications are
commonly deployed in distributed and dispersed manner. Some ERP systems provide
web-based interface. ERP system is always implemented via a core database system.
BI and ERP
integration
341
All applications in the ERP system interact with the database, which ensures the
integrity of the enterprise data. ERP vendors provide diverse modules for corporations
units, such as nance/accounting, HR, sales, manufacturing and logistics, etc. Most
application modules can be integrated for ERP processes.
ERP systems make large enterprises rely on information technology more than ever.
Automate routine process in areas such as accounting, inventory control, and
procurement that accomplishes organizational accessing through automatic updating
of the transaction data. ERP connects various functions of the organization in an
integrated fashion. It improves the responsiveness to customer needs and delivers
products to market quickly through compressed cycle times. ERP system makes data
available in real time and hence allows for a more comprehensive and unied data
management. ERP applications are good at capturing and storing data, but their
reporting capabilities are a major concern to ERP users (Scheurich, 2002).
2.2 Challenges facing ERP systems
The main objective of utilizing ERP systems is to merge corporate-wide data from
various sources so that corporate employees, external partners, suppliers, and
distributors can make good use of the data. Nowadays, the need of data distribution
across the company boundary is extensively increasing and analytical functions are no
longer the province of certain users within the organization. Therefore, organizations
need to distribute the analytic capability to various operational levels, targeted at
specic business needs via key performance indicators (KPIs), dynamic reporting and
real-time analytics (Agostino, 2004). However, ERP systems do not seem to provide all
of the required functionality. The challenges to be faced by ERP systems are discussed
below.
.
Reporting capability. Usually, ERP systems do not offer reporting service on
product line revenue analysis. Also, ERP systems are not capable of providing
ad hoc reporting service. Online views of business operations are not available.
ERP systems do not support cost allocation and prot and loss reporting.
Any complex analytic solutions often require external software or systems
(Agostino, 2004).
.
Budgeting capability. Corporate budgets can be identied and controlled in
various ways. Budgetary changes, however, need to be handled outside the ERP
system, which meant that the budget data within the ERP system will soon
become obsolete (Agostino, 2004).
.
Systems integration capability. Another weakness of ERP systems is its limited
integration capability with other systems. For example, CRM and sales force
automation systems forecasting capability could be used to empower business
decision if they can be integrated with ERP systems. Also, the budgeting tools
are often not well integrated with ERP systems, which cause concerns on
nancial data consistency (Agostino, 2004).
.
Practical problems. Since ERP are complex systems, implementing such systems
can be difcult, time consuming, and expensive. Because ERP are complex in
nature, user training becomes a burden to each ERP-adopted organization.
Another practical concern to the top management is that most ERP
implementations do not offer corporate decision-making functions.
IMCS
13,5
342
2.3 The needs for business intelligence
Organizations recognize the wealth of information within ERP systems, the challenge
lies in the ways of mining them. Since ERP systems were not originally designed to
provide real-time reports to massive users, the entire system could not facilitate the
decision support function. The hope that ERP systems would provide better analytical
and reporting functions is therefore discontented. In order to justify their
return-on-investment (ROI), more and more organizations are turning to BI tools
that make data collected by ERP, customer relationship management (CRM), and other
data-intensive applications meaningful. BI systems can pull the data in ERP systems
and then perform various analyses and deliver superior reporting, which help users
make timely and accurate decisions. More and more organizations extend their ERP
systems beyond the level of back-ofce to improve sales, customer satisfaction, and
business decision-making (Stedman, 1999).
BI tools are capable of analyzing the long- and the short-term business scenarios
using existing data captured from the enterprise information systems. BI technology
can be used for any organization to structure the information in ERP systems and other
data repositories such as data warehouses and data marts for performing optimized
and effective decision-making. Many companies have to rely on a single source of
information (i.e. the transactional systems) to run their day-to-day operations.
However, these transactional systems do not meet managements need to discover
trends and patterns that can be derived from their inherent business rules.
ERP systems built structural and operational characteristics that could weaken
their exibility because ERP systems have been focused on maximizing daily
transactional capability. In other words, ERP systems are usually designed to record
business transactions data, make changes to existing data, reconcile data, keep track of
business transactions, run predened business reports, and manage business
transactions. In contrast, analytical systems are designed to examine large volumes of
data and then to generate essential information for decision-making.
The integration of the BI system and the ERP system contributes additional values
to the business community, for example:
.
Providing meaningful analyses. Although operational reports from ERP system
provide recent business events, they do not satisfy managers needs for ad hoc,
forecasting, and exceptional reports. BI systems, on the other hand, provide
online analytical processing (OLAP) and data mining tools to discover
meaningful trends and patterns. For example, business users can use BI tools to
obtain more detailed information to generate best- or worst-case scenarios for
business planning. Therefore, BI systems add value to ERP by providing
meaningful and comprehensive analyses of the operational data.
.
Optimizing the ERP investment. By integrating BI and ERP systems, organizations
can continuously improve their competitive advantage. For example, a sound BI
solution might allowpurchasing personnel to discover patterns in pricing, which in
turnallows the companyto obtainbetter pricingbychangingpurchasingprocesses.
These discoveries are then used to enhance ERP system.
3. The power of business intelligence
BI tools can be used to generate various aspects of business views through
manipulating existing data captured by companys information systems. BI can be
BI and ERP
integration
343
used for any organization to structure its ERP information and other data repositories,
for fast and effective decision-making. The conventional structured query language
(SQL) and reporting tools provide ad hoc queries; however, BI tools allow users to build
needed queries in a more efcient and user-friendly manner.
Companies that adopt BI can empower their employees decisions capability in a
faster and reliable way. BI delivers better business information through a powerful
grip of organizational data. Since a BI system includes technologies for reporting,
analysis, and sharing information, it can be integrated into the ERP system to truly
maximize the ROI of ERP.
BI is a term introduced by Howard Dresner of Gartner Group in 1989 to describe
a set of concepts and methodologies designed to improve decision-making in
business through the use of facts and fact-based systems (Hashmi, 2004).
Fact-based systems include executive information systems, decision support
systems, enterprise information systems, management support systems, OLAP,
and newer technologies such as data mining, data visualization, and geographical
information systems.
Although some of the enterprise systems furnish with reporting and basic query
functionality, organizational data are scattered in business information systems.
The isolated reporting capability is insufcient for an organization to seek for a
consolidated picture of business operations. Therefore, BI applications step in to
provide tools that can be used across the organization to access, analyze and share
information from a variety of data sources.
3.1 Why BI?
In todays competitive marketplace, a company owns BI possesses distinct advantages
over its market rivals. What does a company know about the customers, vendors,
partners, products, and market will allow its executives to make wise decisions that
may result in dramatically revenue increase, cost reduction, and prot enhancement.
Distinct from conventional reporting tools such as spreadsheets, BI reporting tools
provide a visual interface for accessing and navigating through multidimensional data
sources that stored in transactional systems. This means that decision makers and
analysts will have easier and faster access to frequently updated information, which
supports quicker and better decision-making.
Apowerful BI tool can generate different views fromavailable data system. Ascaled
data mart or data warehouse can provide rich, timely, and well-structured and cleansed
information to the BI tool. It needs only a few seconds to use BI software to generate
requested views of the business. For example, BI software can be used to query
nancial views such as (Rasmussen et al., 2002):
.
Sales order entry. Sales by top customers with time comparisons; sales by
customer and salesperson; sales by customer by location; etc.
.
Accounts receivable. Aging periods by salesperson; aging periods by collection
manger; collections by customer 91 days and over; etc.
.
Bank reconciliation. Cash in the bank; cash on First National Bank; etc.
.
General ledger. Sales and prot by channel; actual, budget, and variance by
division; etc.
IMCS
13,5
344
BI software can also be used to answer marketing and sales queries such as
(CRM2day.com, 2004):
.
who are my best and worst customers?
.
what parameters affect my sales? and
.
where are we making or losing money in different geography, product line, and
campaigns?
The BI tools play a major role of enhancing the quality of decision-making. Generally
speaking, businesses need to focus their BI activities in the following areas in order to
make their business more competitive: cost reduction, protability analysis, product or
service usage analysis, target marketing, relationship marketing, and CRM.
4. Comparison of BI products
MacVittie (2002) compared the technological features of ve major BI software (Brio
Intelligence 6.6, Cognos Series 7, Information Builders WebFocus 4.3.6, Microsoft data
analyzer, and MicroStrategy 7i) based on the following aspects: deployment platform,
databases supported, web servers supported, supports ad hoc queries, distribution
server included, direct access to data sources, OLAP support, and presentation formats.
All these ve BI software can be performed through Microsoft Windows platforms.
Other than Microsoft data analyzer, all the remaining four BI products can work with
HP-UX and Sun Solaris operating systems. Microsoft data analyzer can be deployed by
Windows-based platforms only. The databases support is an important BI capability
since BI solutions need to use data from various databases within enterprise systems.
Most BI solutions except Microsoft data analyzer can work with database systems
such as Informix, DB2, Microsoft Access, Oracle, SQL Server, and Sybase. Most BI
solutions can support web servers such as Apache, IBM WebSphere, iPlanet, and
Microsoft IIS. Microsoft data analyzer, however, supports only Microsoft IIS. It is
clearly to see that Microsoft data analyzer is a Microsoft-bounced BI solution. This
phenomena is evidenced by the features of distribution server included and direct
access to data sources (MacVittie, 2002), in which they indicate that all BI software but
Microsoft data analyzer can be connected to distribution servers and other data
sources.
Features on data analyses are very similar among BI software. They all support
ad hoc queries and OLAP. These two features are the major capabilities of BI solution.
The presentation formats show that all these ve BI software provide web interface
to view HTML and Excel reports. Other than Microsofts data analyzer, the remaining
BI software can produce PDF formatted reports, XML code, and web-based interface.
BI software vendors are advancing their products by adding wireless and web
services capabilities into their products. Recent efforts are made toward easy
aggregation of data from multiple sources to make it appears as if the data is coming
from one source. BI vendors such as Brio and Cognos have announced that their
reporting tools will be integrated with SAP an ERP product.
5. ERP and BI: integrated architecture
ERP systems are transaction-based, that is, ERP applications are designed to
process large volumes of business transactions within sub-second response times.
BI and ERP
integration
345
ERP repositories contain thousands of small tables without the anomaly of data
redundancies, making it easy to nd and update a single data item. On the other hand,
BI systems are query-oriented; they are optimized to handle long-running, complex
queries submitted by users against much larger volumes of data. With BI and ERP
integrated solution, businesses take the advantage of the new tools to access, analyze,
report, and share the information that held in the ERP applications.
The Figure 1 shows the typical BI software that ts in the new framework of ERP
(Datamonitor, 2001). This BI and ERP integrated system consists of the following main
components (Datamonitor, 2001).
(1) Operational data. Organizations must have transactional systems that record
their daily business transactions. The operational data can be found in legacy
systems, CRM applications, ERP applications, click-stream data, and various
online transaction processing (OLTP) systems.
(2) Data integration. Data generated from various transactional systems need to be
consolidated and merged into an enterprise-wide operational data store for
further usage. Through data integration, diversied systems and data formats
can be integrated into a compatible data source.
(3) Data storage. Data warehouse technology plays a major role in data storage
component. Unlike conventional relational databases (where data is
normalized), data is denormalized in a data warehouse. Also, the database is
built around subject matter, and all data regarding that subject is piled into that
database. These characteristics make data warehouse efcient for data access,
Figure 1.
BI and ERP
integrated framework





IMCS
13,5
346
multi-dimensional analysis, and reporting purposes. Data marts also reside in
data storage component. Data mart is a small-scaled data warehouse designed
primarily to address a specic function or departmental needs. Data warehouse
and data marts form good source of information for BI to perform faster,
complex, and ad hoc queries, and generate user-friendly reports with drill-down
capability.
(4) BI software. BI software consists of query and reporting, OLAP, and data
mining tools. BI reporting tools provide a visual interface for accessing and
navigating through multidimensional data that stored in either relational or
multi-dimensional databases. OLAP is a capability of BI that supports
interactive examination and manipulation of large amount of data from many
perspectives. Data mining is a technique for selecting, exploring, and modeling
large amounts of data to discover previously unknown patterns and
correlations, which lead to anticipating future behaviors, events, and
consequences. This BI software allows dynamic enterprise data search,
retrieval, analysis, and explanation for the needs of managerial decisions.
(5) Analytical applications. Analytical applications explain the phenomena of
business based on the existing data. Possible tools for analytical applications
are statistical analysis and forecasting software. Subjects to be analyzed are
applications in eCRM, Financial and KPIs, operations, web trafc, and B2B
exchanges.
5.1 Benets of integrating BI and ERP
BI performs various processes that exploring data, data relationships, and trends
through related methodologies to draw conclusions, this process can drive revenue
growth and improve operational efciency inside an organization. While
organizational ERP system is powerful for processing and storing transactional data
from various internal and external sources, it is not the most effective data distribution
system in existence. The integration of BI and ERP systems can strengthen corporate
decision-making capability through utilizing the analytical capability of BI system and
data managerial capability of ERP system. This framework will result in an optimal
utilization of both ERP and BI systems. More specically, this new framework can
generate the following benets (Agostino, 2004):
.
enabling nance personnel to generate revenue/expense reports quickly;
.
allowing the controller to recognize corporate cash ow in real time;
.
sharing sales information with the management, this allows for making better
corporate decisions based on a macro view of the business;
.
facilitating a company to perform interdepartmental collaboration;
.
improving accounts payable and vendor relation management;
.
enabling sales force management;
.
improving protability by analyzing transactions data and forecasting business
trends;
.
improving customer relations through in-depth sales data mining;
.
providing online access to data, which saving access time; and
.
reducing time to generate regular reports.
BI and ERP
integration
347
5.2 Concerns to integration
Although it can generate a sufcient amount of benets through the integration of BI
and ERP systems, there are concerns for effective implementation and utilization of
such integrated systems. These concerns are technological innovation, reliability and
availability, scale efciency, and system exibility.
.
Technological innovation. The customers needs are changing constantly. BI
solutions should constantly adhere to the changing requirements and provide
information infrastructures that well suites them instead of sticking with the
same old technologies that do not satisfy the user community.
.
Reliability and availability. As a BI system scales up to the changing needs of the
business, it should guarantee a continuous service with reliable performance.
A BI system should be equipped with tools that provide load balancing, backup,
and automated disaster recovery in times of need.
.
Scale efciency. While ERP system supports the enterprise-wide transactions, an
integrated BI system becomes so critical on its scale efciency. As an enterprise
grows, it must provide proven infrastructure to manage, schedule, and deliver
information to the right destination at the right time.
.
System exibility. ERP systems are, most of the time, inexible. Therefore, it is
the responsibility of BI systems to support all major web standards and integrate
seamlessly with existing applications and infrastructures without much
complexity.
6. Conclusions
ERP system has been recognized as a powerful system for handling corporate resource
planning and supply chain processing. An eminent contribution made by ERP system
is its capability of integrating and managing enterprise-wide transactional data. Most
ERP systems in the market can perform this feature well, however, the data reporting
and analytics capabilities are absent in them. In order to ll the gap of this important
need for corporate decision-making, BI tools can be used to align the path of this
information technology innovation.
BI software gains more acceptance as users at all levels of the organization realize
the benets of its decision support capabilities. Companies that were unable to justify
ROI for ERP implementation are now implementing BI software since BI enhances the
utilization of the enterprise data.
ERP systems are extremely complex and it is difcult to extract data for BI in a way
that is independent of the extract facilities supported by the ERP system. ERP systems
streamline enterprise transactional data. BI systems add intelligence into their ERP
data. Together, ERP and BI can greatly improve the IT performance and
decision-making capability inside the organization.
References
Agostino, R. (2004), Business intelligence: solving the ERP overload, available at:
www.crystaldecisions.com/jump/crystal_cfo/pdf/crystal_cfo_project_voll.pdf
CRM2day.com (2004), Business intelligence, available at: www.crm2day.com/bi
Datamonitor (2001), Business intelligence: from data to prot, available at:
www.researchandmarkets.com/reportinfo.asp?cat_id 41&report_id 560
IMCS
13,5
348
Hashmi, N. (2004), BI for sale, available at: www.intelligenterp.com/feature/hashmiOct20.shtml
MacVittie, L. (2002), Business intelligence with smarts, Network Computing, 30 September,
pp. 42-57.
Rasmussen, N., Goldy, P.S. and Solli, P.O. (2002), Financial Business Intelligence, Wiley,
New York, NY.
Scheurich, L. (2002), Maximizing the ERP investment, Competitive Financial Operations:
The CFO Project, Vol. 1, pp. 1-6.
Stedman, C. (1999), Whats next for ERP?, ComputerWorld, Vol. 33, pp. 48-9.
Yen, D.C., Chou, D.C. and Chang, J. (2001), A synergic analysis for web-based enterprise
resources planning systems, Computer Standards & Interfaces, Vol. 24, pp. 337-46.
BI and ERP
integration
349